The decision came after several years of disagreement between Kaunas authorities and Gazprom's over the latter's unfulfilled investment commitments and disapproval from the local and central authorities for a KTE expansion project worth around a billion litas (EUR 300,000).
Antanas Pranculis, CEO of KTE, told BNS on Friday that earlier in the day, he had handed a letter from Gazprom Vice-president Valery Golubev to Kaunas Energija (Kaunas Energy) and its owner, Kaunas' local government.
"I have handed in Golubev's letter saying that a decision has been made to sell the stake in KTE to the minority shareholder, Clement Power Venture Inc. In accordance to the Law on Companies, the shares were offered to both minority shareholders, but Dujotekana did not accept the offer," he said.
Reportedly, Rimandas Stonys, who held a 34 percent stake in Dujotekana in late 2010, is also a shareholder of Clement Power Venture Inc. He could not be reached by BNS for comment.
The value of the planned deal is not being disclosed.
Pranculis said that it would be closed only after Kauno Energija's management board greenlit it.
"Without Kauno Energija's consent, nothing can happen. If they give their consent, the transaction will take place very quickly," he said.
Kauno Energija CEO Rimantas Bakas told BNS that the process would take time, because the transaction would require approval from all of Kauno Energija’s shareholders, including the Council of Kaunas. He said that he did not know yet what the city's position was on that issue.
"Under the agreement on the sale of the Kaunas power plant to Gazprom, it has to maintain more than 50 percent of shares. Thus, the current ownership change does not comply with the agreement. Therefore, they must obtain consent from all shareholders of Kauno Energija. I don't know the shareholders' position at the moment," he said.
Bakas said that a number of legal and other obstacles had to be resolved before the stake could change owners.
"These include the heat purchase contract and agreements on the assets and investment. All of these have to be assessed. Also, arbitration proceedings are ongoing. Our aim to ensure reliable heat supply to customers in Kaunas," he said.
Pranculis said that Gazprom's decision to sell the plant was mostly due to political reasons, that is, opposition from Kaunas' authorities. "Kaunas, at last, has an opportunity to free itself from Gazprom's monopoly," he said.
The business daily Verslo Žinios quoted Stonys as saying that the natural gas-based heating energy production business had no prospects in Lithuania and that following the acquisition, he would convert the plant to burn biofuel and upgrade it in line with the new pollution requirements that will come into effect in 2016.
Pranculis confirmed that KTE backed this position.
"We could have an 80-megawatt heat energy capacity by burning biofuel. Other capacity is not of much interest to us, because we would have problems producing more (energy) starting 2016 due to the EU pollution requirements," he said.
The plant has an installed capacity of 170 MW, but the actual average annual capacity amounts to 70-80 MW, the CEO said.
KTE early this year put forward a new investment plan, worth 200 million litas (EUR 58 m), to Kauno Energija. The plan calls for upgrading the plant's natural gas burning equipment and converting its steam boiler to a biofuel boiler with a capacity of 200 MW.
Several years ago, Gazprom unveiled plans to build a new power plant with a capacity of over 300 MW in Kaunas by 2016 and invest around a billion litas in the project, but the Lithuanian central government and Kaunas' authorities did not approve of these plans. It was said that the city did not need a plant with such a high capacity and that its priority was to develop alternative energy resources.
Amid disagreements over investments, in March 2010 Gazprom demanded around 342 million litas from Lithuania to compensate for losses it said to have incurred over six years due to the state's alleged failure to meet its obligations.
Gazprom, together with the Lithuanian gas supplier Dujotekana and Clement Power Venture, purchased KTE from Kauno Energija for 116 million litas in 2003 and pledged to invest another 400 million litas in the plant to increase its capacity by 80 MW.
KTE supplies about 80 percent of Kaunas' energy needs.